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2018 (3) TMI 483 - AT - Central ExciseCENVAT credit - Rule 16 of the CCR - returned defective printed corrugated boxes - case of the department is that the corrugated boxes once get defective cannot be repaired and therefore the same cannot be either returned to the same buyer or even to other persons - Held that - As the said stock is liable for duty but only at the time of removal thereon, before that CENVAT credit cannot be questioned - Even as per Rule 16 also after taking cenvat credit on the duty paid returned goods, the subsequent payment of duty is made only at the time of removal of such returned goods and not during the time it is lying in the factory - demand set aside - appeal allowed - decided in favor of appellant.
Issues: Availment of cenvat credit on returned defective printed corrugated boxes under Rule 16 of Cenvat Credit Rules, 2002.
Analysis: 1. The appellant availed cenvat credit on defective printed corrugated boxes returned to the factory. The department contended that once the boxes are defective, they cannot be repaired or returned, making the cenvat credit inadmissible under Rule 16 of the Cenvat Credit Rules. The adjudicating authority confirmed the demand, but the Commissioner (Appeals) allowed partial credit, disallowing an amount because the goods were still in the factory. 2. The appellant's counsel argued that the boxes were returned due to moisture and were brought back solely for moisture removal, justifying the credit. He emphasized that the duty on the stock would be paid upon clearance for home consumption, hence the credit should not be denied based on the goods being defective and in the factory. The Revenue supported the impugned order's findings. 3. The appellate tribunal noted the Commissioner (Appeals) agreeing in principle to the admissibility of cenvat credit, except for goods still in the factory. The tribunal highlighted that duty on the stock is payable upon removal, not while in the factory. Rule 16 specifies duty payment upon removal of returned goods, not while in storage. Consequently, the tribunal found the denial of credit for the amount related to goods in the factory incorrect, setting aside the demand, interest, and penalty. The appeal was allowed, modifying the impugned order.
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